After moving higher for 5 days in a row, mortgage rates finally moved a bit lower today.  The improvement was fairly small, however, merely undoing Friday's modest move higher.  

Bonds markets (which dictate rates) continue to price in extremely high chances of a Fed rate hike next week.  That wasn't entirely the case before the recent 5-day losing streak.  In fact, the odds of a Fed rate hike more than doubled last week based on market metrics.  

This doesn't mean the Fed was half as likely to hike 2 weeks ago.  Rather, it has more to do with the fact that financial markets had been sort of complacent about adjusting bond prices to reflect the probability.  Complacency ended early last week and bond yields (and thus "rates") quickly adjusted to their new, higher reality).

In other words, the past week was more than just a random move inside a narrow range for mortgage rates.  It was a legitimate repricing of expectations.  It would take something very compelling to push rates significantly lower between now and next Wednesday's Fed announcement.  This could come in the form of shockingly bad employment numbers on Friday or massive geopolitical drama, but until it happens, it's safer to remain defensive with respect to locking and floating. Inclined floaters should understand there's not a huge payout if rates manage to improve this week.

Loan Originator Perspective

Bond markets were basically flat today, which is refreshing after last week's sell-off.  My pricing was marginally worse than Friday's, but the difference was slight at most.  We're hanging near the top of recent ranges, may be worth waiting to see if we bounce back down over the next few days.  Friday brings February NFP Jobs Situation Report, but no Fed speak this week ahead of next week's meeting.  There's limited benefit in floating here, but (at least for a day or two) it may be worth the limited risk. -Ted Rood, Senior Originator

I like that bonds are lower today than the worse levels from Friday.  Could a bounce be in play to take us back to the lows or last week?  Possibly, but the payroll data due later this week and a Fed rate hike coming next week, not so sure this is much to gain.  Only loans I would float overnight are those that you would have to lock on a longer period today versus a shorter lock period tomorrow.  Other than that, nothing wrong with locking here. -Victor Burek, Churchill Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 4.25%
  • FHA/VA - 3.75-4.25%
  • 15 YEAR FIXED - 3.375-3.5%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates had been trending higher since hitting all-time lows in early July, and exploded higher following the presidential election
  • Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm

  • With the incoming administration's policies driving a large portion of upward rate momentum, mortgage rates will be hard-pressed to return to pre-election levels until well after Trump takes office.  Rates can move for other reasons, but it would take something big and unexpected for rates to get back to pre-election levels. 
  • We'd need to see a sustained push back toward lower rates (something that lasts more than 3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers. 
  • As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).